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Plucking the Golden Goose Won’t Help Patients


Written by Joseph Allen
Allen & Associates
Posted: Dec 3, 2012 @ 10:37 am

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The Goose that Lays the Golden Eggs. Courtesy The Gutenberg Project Ebook of Punch, or the London Charivari, 2/19/1919

UPDATED (see comment #4)

Several public interest groups recently filed a march in petition under the Bayh-Dole Act asking NIH to force Abbott Laboratories to license its competitors for the production of Ritonavir, a drug used to treat AIDS.  Abbott used federal funding in making the invention.  The complaint is that Ritonavir is more expensive for private users in the US than it’s priced abroad. This is a repetition of a similar action dismissed by NIH in 2004 as regulating prices is not a trigger for march in’s under the law.

Hopefully the Obama Administration agrees with the prior dismissal and again denies this latest effort.

The new petition also lays a trap for other drug developers. It proposes that any drug derived from federal funding also be subjected to march in licensing if it’s sold at a higher price in the US than in seven  ”comparison countries,” or if US prices are higher than median prices abroad.

While making drugs affordable is certainly a laudable goal, this burden is simply not one that can be borne by the Bayh-Dole system. If adopted the proposal could  be the death knell for university/industry drug development partnerships that have done so much to protect public health worldwide.

Companies would be whipsawed for selling drugs in foreign markets with price controls over which they may have little say.  With this added burden, what company would license embryonic academic inventions already requiring billions of private development dollars, and more than a decade of testing and regulatory hurdles, with few drug discoveries ever returning any revenue? How many investors would fund university life science start-up companies?

Drug developers face a daunting task. For every 5,000 drugs tested, about five proceed to clinical trials. Perhaps one is eventually approved.  That one must not only pay for itself, but for all the company’s other drugs that died along the way. This grim math eludes the petitioners.

The proponents seem to believe that the golden goose of US drug development will continue producing as a matter of course. But US leadership in the field is anything but assured.  High-tech start-up companies form and grow where patent rights are strongest, and governments don’t arbitrarily change the rules penalizing success. In an era of globalization and multi-national companies, continued US dominance cannot simply be assumed.

The commercialization system unleashed by the Bayh-Dole Act is a marvel.  Previously 28,000 federally funded inventions were taken from their creators, mostly wasting away on government shelves.

Congress was particularly concerned with the impact of this failure on public health. In its report endorsing Bayh-Dole, the Senate Judiciary Committee said that under the previous patent policies “not one drug (emphasis in original) had been developed and marketed from HEW (now HHS) research because of a lack of incentives to the private sector to commit the time and money needed to commercialize these inventions.”

Senators Bayh and Dole held a press conference identifying promising medical technologies not being developed because the intended incentives of the patent system had thus been destroyed. This is not what the US Constitution had in mind when it established intellectual property rights to promote innovation.

Now fast forward thirty years.  An article in The New England Journal of Medicine found 153 FDA approved drugs, vaccines, or new indications for existing drugs currently fighting human suffering around the world as a result of Bayh-Dole.

The march in provision of the law ensures that companies do not license government supported technologies to suppress them.  March in’s also provide that in times of emergency adequate supplies of the product will be made available to meet public needs. That price control is no trigger for forced march in licensing was attested to by Senators Bayh and Dole when this theory first arose.

And we have clear evidence that such approaches simply do not work.

In 1989 Congress pressured NIH to include in its own R&D partnerships with industry language mandating that resulting inventions must demonstrate “a reasonable relationship between the pricing of a licensed product, the public investment in that product, and the health and safety needs of the public.”

However, the result was not the increased availability of new drugs at lower prices.  Instead industry collaborations collapsed. NIH finally rescinded the requirement finding “this policy had the effect of posing a barrier to expanded research relationships and, therefore was contrary to the Bayh-Dole Act.”

Rather than meekly accepting the proposed terms of the new march in petition, companies are likely to just walk away from commercializing federally supported inventions as they did before Bayh-Dole.  The US life science industry would suffer a serious blow, shifting even more research abroad to our competitors now actively courting them. But the real suffering would fall on those desperately seeking new therapies to alleviate their pain.

At the 30 year celebration of Bayh-Dole, cancer survivor Betsy de Parry looked Senator Bayh in the eye and said: “Because of your law, I’m alive today.”  There was not a dry eye in the house, including mine. If the current petitioners are successful, those suffering in the future may not be as lucky as Betsy.


About the Author

Joe Allen is a 30-year veteran of national efforts to foster public/private sector commercialization partnerships, and author of numerous articles on technology management for national publications. Joe served as a Professional Staff Member on the U.S. Senate Judiciary Committee with former Senator Birch Bayh (D-IN), and was instrumental in working behind the scenes to ensure passage of the historic Bayh-Dole Act. Joe has served as the Executive Director of Intellectual Property Owners, Inc., a trade association representing major R&D companies, he was involved in the creation of the Court of Appeals for the Federal Circuit, and he also served at the U.S. Department of Commerce as the Director of the Office of Technology Commercialization. From 1992 until 2004, Allen was with the National Technology Transfer Center (NTTC), becoming President in 1997. Clients included NASA, the Department of Defense, EPA, the Department of Veterans Affairs, and the Department of Commerce. Between 2004 until 2007, Allen was the Vice President and General Manager of the West Virginia High Technology Consortium Foundation. In 2008, Joe founded Allen & Associates to continue to facilitate public/private partnerships between universities, federal laboratories and industry.

5 comments
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  1. Joe-

    I have a quick question about a line in your article, “It proposes that any drug derived from federal funding also be subjected to march in licensing if it’s sold at a higher price in seven “comparison countries,” or if US prices are higher than median prices abroad.”

    Is the petition indeed proposing that march ins are triggered if the drug is sold at a higher price IN seven comparison countries, or did you mean to say that they trigger if the drug is sold at a higher price in the US THAN it is sold for in these seven comparison countries?

    Thank you in advance for clearing up my confusion.

  2. Sorry for any confusion. The proposed trigger
    is if US prices are higher than those in
    the other countries.

  3. Joe-

    Thank you for the clarification. The article is very informative.

  4. Excellent insightful post….
    I agree with your comment – that “Hopefully the Obama Administration agrees with the prior dismissal and again denies this latest effort.”

    Particularly in light of the current economic crisis / fiscal cliff…
    Circumstances TODAY are quite different than 2004.

    TODAY – Obama believes it’s in the “Government Interest” to fund PPACA / Obamacare.

    Couple the current climate with the economic distribution beliefs, class warfare rhetoric (any family making over $250k is rich irrespective of the region of the country/cost of living in that region) with the characterization that all pharma companies are evil and only interested in profit and not life saving therapeutics… and you have a perfect storm – a crisis not to be wasted.

    You’re right- the US life science industry would suffer a serious blow…reductions in university-industry partnerships, more jobs lost to overseas, less new therapies…. would be a total nightmare – a far cry from the American Dream.

  5. Joe asked me to update the article to address the issue raised in comments #1 and #2 above. The second sentence of the third paragraph now reads: “It proposes that any drug derived from federal funding also be subjected to march in licensing if it’s sold at a higher price in the US than in seven “comparison countries,” or if US prices are higher than median prices abroad.”

    Thanks.

    -Gene

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